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Cleveland: Sherwin-Williams' Headquarters

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6 minutes ago, Geowizical said:

 

So I'm assuming these 3-4 more towers haven't been announced/proposed yet? A mix of local and out-of-town developers is intriguing...

 

 

Correct

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Thanks for posting those, Geowizical!  It's always great to have a visual that ties it all together.

 

I do hope that if S-W does build a new tallest for Cleveland that they come up with something a little more interesting design-wise.  Not that I wouldn't take what they've proposed!

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20 minutes ago, X said:

I do hope that if S-W does build a new tallest for Cleveland that they come up with something a little more interesting design-wise.  Not that I wouldn't take what they've proposed!

 

I agree 100%. I think there is 0 chance they use the Amazon plans if someone else is developing new concepts. I'm just not talented enough to design such an interesting skyscraper, so I used the Amazon one as a placeholder instead. If they do decide to go supertall, there's going to be a lot of pressure to create something unique that also meshes nicely with the current heavy hitters of the skyline for sure.

 

But here's an idea, maybe they make it look like one massive paintbrush handle sticking out of the ground 🤣

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44 minutes ago, Geowizical said:

 

I agree 100%. I think there is 0 chance they use the Amazon plans if someone else is developing new concepts. I'm just not talented enough to design such an interesting skyscraper, so I used the Amazon one as a placeholder instead. If they do decide to go supertall, there's going to be a lot of pressure to create something unique that also meshes nicely with the current heavy hitters of the skyline for sure.

 

But here's an idea, maybe they make it look like one massive paintbrush handle sticking out of the ground 🤣

Actually, there never was an Amazon model. These models were the SHW models that they were working on prior to the Valspar acquisition.

These models never were announced as everything was put on hold once they acquired Valspar. City of Cleveland used theses drawings in their

attempt to lure Amazon2.

 

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On 8/2/2019 at 10:57 AM, JSC216 said:

 

Serious question, is there actually any legitimacy to Eaton and American Greetings struggling to attract talent? I feel like this idea has grown from “they probably will” to “they are” to “they regret moving” without any actual facts. Like a bad game of telephone. 

 

As for Progressive the downtown outpost is tiny strategy team of 40 people and has nothing to do with them struggling to attract talent. In fact Progressive has been expanding their presence in the suburbs with purchases of buildings, new construction, and thousands of new jobs.

 

That being said I would love to have these companies downtown. 

 

There's a lot of legitimacy to it. Are AG and Eaton able to attract employees? Sure, but are they attracting the best local and national talent? Heck no.

I know MANY people who would rather take less $ to work downtown over a suburban location if given the choice.

 

Another Example:

As for Millennia's other potential downtown projects, Sinito isn't dropping many hints. He said his business needs 30,000 square feet for its headquarters - up from the 21,000 square feet the companies occupy at Sinito's Thornburg Station development on Rockside Road. He wants to buy, not lease. And he's looking at buildings that could accommodate several uses, including more apartments.

There is vacant land next to Thornburg Station, where Sinito originally planned to build a new headquarters complex as his company grew.

But his plans, and the market, have changed.

"When we think about recruiting and we think about really good employees, I think that there's a lot of excitement downtown," Sinito said. "People that are younger than me, they want to work down there."

 

https://www.cleveland.com/business/2014/04/millennia_companies_to_buy_gar.html

Edited by Clefan98
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6 hours ago, Clefan98 said:

 

There's a lot of legitimacy to it. Are AG and Eaton able to attract employees? Sure, but are they attracting the best local and national talent? Heck no.

I know MANY people who would rather take less $ to work downtown over a suburban location if given the choice.

 

https://www.cleveland.com/business/2014/04/millennia_companies_to_buy_gar.html

FYI AG gets thousands of applicants from all over the world for an opening position.  They hire the best prospective artists in the field. Same with Hallmark in Kansas City. They’re not hurting for talent. 

 

 

 

 

 

 

 

Edited by surfohio
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So I have an inside on the rumors of SW tower even though I'm no longer in Cleveland. I have a buddy who is in the Financial division of SW right outside of Cleveland. He says it's just not in the budget right now, there's nowhere near the amount of capital. They're looking for finance options at the moment, but after the acquisition of Valspar it's been scraping really close to the bottom dollar.

Edited by tastybunns
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42 minutes ago, tastybunns said:

So I have an inside on the rumors of SW tower even though I'm no longer in Cleveland. I have a buddy who is in the Financial division of SW right outside of Cleveland. He says it's just not in the budget right now, there's nowhere near the amount of capital. They're looking for finance options at the moment, but after the acquisition of Valspar it's been scraping really close to the bottom dollar.

 

Your source is partially correct. SHW isn't building anything for a couple more years until the Valspar debt is down to levels more common across the coatings industry. See this article here: http://neo-trans.blogspot.com/2019/03/new-sherwin-williams-hq-plans-may-stir.html

 

But they have already written their RFP and I believe it has been released. If not, they have sent out feelers because most sources I've spoken with are aware of the RFP, the proposed uses, and the square footage involved. And SHW's company-wide e-mail blast advising everyone not to talk to the media after I wrote this article http://neo-trans.blogspot.com/2019/05/sherwin-williams-hq-will-it-be-ohios.html was a nice non-denial denial.

 

BTW, I wrote a little too much about sources in my first draft of this response. I'm glad @Tastybunns saw the first draft. I hope very few others did. 🙂

 

 

Edited by KJP
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^so if the concern is capital/debt levels, what if another developer built the tower(s) for SW and they just signed a long term lease?  Isn't that what's really on the table here?

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Just now, gottaplan said:

^so if the concern is capital/debt levels, what if another developer built the tower(s) for SW and they just signed a long term lease?  Isn't that what's really on the table here?

 

Long-term leases count as debt.


"Those who can make you believe absurdities, can make you commit atrocities."-Voltaire

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Just now, freefourur said:

 

Wouldn't they be able to sell their current building to offset the debt?

 

Sure. Or it could be done as part of a trade. That's just my thought, not from any source or anything.

 

I will say this -- two sources of mine who were worried a month or two ago that Sherwin-Williams could leave downtown are less worried now. They couldn't say why. But they are VERY close to the situation. They caution that they won't feel 100 percent at ease until some agreements are in place.

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Sherwin-Williams could also be worried about lead paint liabilities.  Asbestos cases bankrupted Armstrong-World Industries, an otherwise very strong company.

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5 hours ago, Dougal said:

Sherwin-Williams could also be worried about lead paint liabilities.  Asbestos cases bankrupted Armstrong-World Industries, an otherwise very strong company.

 

That would be a reasonable explanation if things were on hold. They're not. 

 

5 hours ago, gottaplan said:

^so if the concern is capital/debt levels, what if another developer built the tower(s) for SW and they just signed a long term lease?  Isn't that what's really on the table here?

 

BTW, and even though long-term leases count as debt, they don't count until the tenant starts occupying the building. That starts later than debt instruments necessary to start construction. So if a turnkey developer builds a building for SHW, then SHW could move in by the end of 2022 and have the long-term lease start counting against it debt, right around the time that the SHW gets it debt-to-equity ratio down to industry norms.

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8 hours ago, KJP said:

I will say this -- two sources of mine who were worried a month or two ago that Sherwin-Williams could leave downtown are less worried now. They couldn't say why. But they are VERY close to the situation. They caution that they won't feel 100 percent at ease until some agreements are in place.

 

*Relaxes slightly in chair*

 

 If you were to start a "Holy Crap, Sherwin Williams is Leaving Downtown Doomsday Clock" right now (pardon my french), on a scale of 1 (definitely staying) to 10 (definitely leaving), how would you gauge the response you mentioned? And how would you compare that to, say, the beginning of the year or since last you heard?

Edited by Geowizical

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13 minutes ago, Geowizical said:

 

*Relaxes slightly in chair*

 

 If you were to start a "Holy Crap, Sherwin Williams is Leaving Downtown Doomsday Clock" right now (pardon my french), on a scale of 1 (definitely staying) to 10 (definitely leaving), how would you gauge the response you mentioned? And how would you compare that to, say, the beginning of the year or since last you heard?

 

Already made it

https://www.timeanddate.com/countdown/taxday?iso=20200415T00&p0=417&msg=Holy+Crap%2C+Sherwin+Williams+is+Leaving+Downtown+Doomsday+Clock&font=slab

 

Please dont quote me as serious lol. The title is so long it doesnt even fit on the page.

Edited by tastybunns
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9 hours ago, KJP said:

BTW, I wrote a little too much about sources in my first draft of this response. I'm glad @Tastybunns saw the first draft. I hope very few others did. 🙂

 

Trip to the wayback machine may bring that back 😉

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Looking at Sherwin Williams Q2 report I was struck by two things. First, is how fast they are paying off their debt. But second is they have listed a 1.362 billion long term operating lease liability that they didn’t have a year ago. @KJP is that in reference to their potential new building or something else?

7BE181CA-D78D-4F7A-8928-DAD91FEBBFAE.jpeg

Edited by cle_guy90
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It's too soon for long-term debt from a new HQ/R&D to show up on SHW's books, if SHW does in fact decide to lease its new HQ/R&D.

 

My guess is that it could be related to SHW selling off its retail stores.

 

But here's the kicker -- if SHW was so concerned about its debt, then why did it take on $1.3 billion in new debt at a time they are supposedly so desperate to reduce the debt they added from the Valspar deal? And, by the way, the full measure of debt is by the debt-to-equity ratio. Note that SHW's equity value has been largely immune to the overall market's volatility. This is pretty steady share price growth, YTD....

 

SHW stock price 2019.JPG

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Operating leases and finance leases (fka capital leases) are not treated the same (operating leases are not treated as debt). The Company would need to analyze whether the lease would met the criteria of a finance lease (https://www.fasb.org/leases). A 30-year lease may still be accounted for as an operating lease, which would result in a balance sheet only gross-up under ASU 2016-02.

Edited by jfristik
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34 minutes ago, cle_guy90 said:

Looking at Sherwin Williams Q2 report I was struck by two things. First, is how fast they are paying off their debt. But second is they have listed a 1.362 billion long term operating lease liability that they didn’t have a year ago. @KJP is that in reference to their potential new building or something else?

 

 

I'm out of my element here, but I think it was just an accounting rule change that now requires certain leases be reported as both assets and liabilities. Note the operating lease right-of-use assets line item that also newly appeared in 2019. Might reflect new stuff, might reflect a bunch of random real estate/equipment leases that only now have to be shown here.

Edited by StapHanger
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3 minutes ago, jfristik said:

Operating leases and capital leases are not treated the same (operating leases are not treated as debt). The Company would need to analyze whether the lease would met the criteria of a capital lease (https://www.fasb.org/leases). A 30-year lease may still be accounted for as an operating lease, which would result in a balance sheet only gross-up under ASU 2016-02.

 

 

DBA6AEA3-3CF8-4B1D-9DF8-8FF89BBE4372.gif

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The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position.

 

For finance leases, a lessee is required to do the following: 1. Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position 2. Recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income 3. Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows.

 

For operating leases, a lessee is required to do the following: 1. Recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position 2. Recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis 3. Classify all cash payments within operating activities in the statement of cash flows.

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It is a balance sheet only gross-up. Does not impact the income statement, or key operating ratios. 

 

Previously future operating lease payments were off-balance sheet and disclosed in the footnotes to the financial statements. This is a form over substance change for operating leases with no real impact to the users of the financial statements. 

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1 hour ago, jfristik said:

It is a balance sheet only gross-up. Does not impact the income statement, or key operating ratios. 

 

Previously future operating lease payments were off-balance sheet and disclosed in the footnotes to the financial statements. This is a form over substance change for operating leases with no real impact to the users of the financial statements. 

My CPA sense is tingling.

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13 minutes ago, Boomerang_Brian said:

 

He must have missed the other half of that blog post. 

 

He's a writer for the Brecksville Magazine. His readers are interested in Brecksville. I spoke to him after he put the story to bed. That's OK, it's looking more likely that SHW stays and its R&D stays with it. BTW, I also told him that Brecksville-based Cross Country Mortgage is likely to move its HQ downtown too. The company has bought a lot of property on the east end of downtown, between Superior and Payne.

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9 minutes ago, KJP said:

 

He's a writer for the Brecksville Magazine. His readers are interested in Brecksville. I spoke to him after he put the story to bed. That's OK, it's looking more likely that SHW stays and its R&D stays with it. BTW, I also told him that Brecksville-based Cross Country Mortgage is likely to move its HQ downtown too. The company has bought a lot of property on the east end of downtown, between Superior and Payne.

 

Good to hear SHW is more likely to stay in downtown at this point, although do we know for sure that Brecksville is starting to look like a long shot/be out of the picture at this point? 

(These types of articles always make me nervous, especially when they contradict current rumors/assumptions, like the fact that SW will probably stay downtown as mentioned by KJP.)

 

Can't wait for some official announcement and/or the designs to start coming out...

 

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Nothing is for certain until a formal announcement is made. And we may be months away from that. I don't expect anything this year. Keep an eye on SHW's cash flow. If it keeps flowing, we should hear something before this time next year......

 

Sherwin-Williams' (SHW) Shares Rise 34% YTD: Here's Why

https://finance.yahoo.com/news/sherwin-williams-shw-shares-rise-121212292.html

 

BTW, to emphasize the importance of cash flow, consider that, six months ago, SHW had been on a glidepath to get its long-term debt down to a 2:1 ratio by December 2019.

 

But it's already five months ahead of that pace. On June 30, I expected that long-term debt would be $8.12 billion. Instead, it was $7.2 billion. Shareholder equity is only slightly below where I expected it to be on June 30, 2019. I expected that it would be at about $3.77 billion. Instead it was at $3.75 billion.

 

It's debt-to-equity ratio on June 30 was already below 2:1 -- at 1.92:1.

 

According to second-hand sources, SHW officials have said that they wouldn't consider building a new HQ until its debt was down to reasonable levels (I assume that to mean industry norms of 1:1 ratio). I wasn't expecting SHW to hit that level until the end of 2022. If things keep going the way they are, SHW should get its long-term debt down to the industry norm by early 2022. And it takes more than three years to plan and build a skyscraper (even without a site search).

 

 

Edited by KJP
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I can't believe the city center is competing with an outer ring suburb for a Fortune 500 company in this day and age. What in the world is with this region? I was researching the amount of corporations that remain in Cincinnati and it blows my mind the comparison of major jobs between us and out Sourthern brother. The amount of sprawl in this region is appalling and the possibility of Sherwin Williams moving to Brecksville just shows NEO continues to circle the drain.

Edited by AsDustinFoxWouldSay
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No one has left yet. DiGeronimo approached SHW, not the other way around. And just like in Cleveland, where many corporations are moving to downtown from the suburbs, there are always exceptions even in healthy downtowns....

 

TORONTO:

https://business.financialpost.com/real-estate/property-post/suburban-offices-outpace-downtown-for-the-first-time-in-a-year

 

MINNEAPOLIS:

https://finance-commerce.com/2018/03/former-target-campus-may-appeal-to-downtown-tenants/

 

SEATTLE:

https://www.geekwire.com/2019/exclusive-amazon-moving-thousands-employees-seattle-relocating-key-division-nearby-city/

 

SAN FRANCISCO:

https://www.bizjournals.com/sanfrancisco/news/2018/10/09/bay-area-exodus-headquarters-move.html

 

If you think NEO is circling the drain, you're not paying attention to the employment data. 

Edited by KJP
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5 hours ago, KJP said:

Nothing is for certain until a formal announcement is made. And we may be months away from that. I don't expect anything this year. Keep an eye on SHW's cash flow. If it keeps flowing, we should hear something before this time next year......

 

Sherwin-Williams' (SHW) Shares Rise 34% YTD: Here's Why

https://finance.yahoo.com/news/sherwin-williams-shw-shares-rise-121212292.html

 

BTW, to emphasize the importance of cash flow, consider that, six months ago, SHW had been on a glidepath to get its long-term debt down to a 2:1 ratio by December 2019.

 

But it's already five months ahead of that pace. On June 30, I expected that long-term debt would be $8.12 billion. Instead, it was $7.2 billion. Shareholder equity is only slightly below where I expected it to be on June 30, 2019. I expected that it would be at about $3.77 billion. Instead it was at $3.75 billion.

 

It's debt-to-equity ratio on June 30 was already below 2:1 -- at 1.92:1.

 

According to second-hand sources, SHW officials have said that they wouldn't consider building a new HQ until its debt was down to reasonable levels (I assume that to mean industry norms of 1:1 ratio). I wasn't expecting SHW to hit that level until the end of 2022. If things keep going the way they are, SHW should get its long-term debt down to the industry norm by early 2022. And it takes more than three years to plan and build a skyscraper (even without a site search).

 

 

KJP: Assume that we live in a perfect world and assume that they build downtown.   If the debt ratio ratio goes down to 1:1 at the end of 2022 -  Is that when they make the announcement

or do they announce sooner ( Like you think - next year ). How long before we see a shovel in the ground after the announcement?   Is 2 years enough time to get thru CPC and the capital Stack.  OR are they going to need layers & layers of TIF's and all kinds of subsidies to get started.  Nucleus is already 5 years and nobody knows where it stands at the moment.

I think a Fortune 500 company won't have that difficult of a time once they get their debts down.

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9 minutes ago, simplythis said:

KJP: Assume that we live in a perfect world and assume that they build downtown.   If the debt ratio ratio goes down to 1:1 at the end of 2022 -  Is that when they make the announcement

or do they announce sooner ( Like you think - next year ). How long before we see a shovel in the ground after the announcement?   Is 2 years enough time to get thru CPC and the capital Stack.  OR are they going to need layers & layers of TIF's and all kinds of subsidies to get started.  Nucleus is already 5 years and nobody knows where it stands at the moment.

I think a Fortune 500 company won't have that difficult of a time once they get their debts down.

 

Stay tuned. New article coming out soon....

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9 hours ago, simplythis said:

KJP: Assume that we live in a perfect world and assume that they build downtown.   If the debt ratio ratio goes down to 1:1 at the end of 2022 -  Is that when they make the announcement

or do they announce sooner ( Like you think - next year ). How long before we see a shovel in the ground after the announcement?   Is 2 years enough time to get thru CPC and the capital Stack.  OR are they going to need layers & layers of TIF's and all kinds of subsidies to get started.  Nucleus is already 5 years and nobody knows where it stands at the moment.

I think a Fortune 500 company won't have that difficult of a time once they get their debts down.

I wouldn't compare a global corporation like SW to Stark Enterprises.  SW has far too many resources to bring its projects to closure.

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9 hours ago, KJP said:

 

Stay tuned. New article coming out soon....

KJP: I absolutely love the rendering you shared of the SW HQ that was submitted for NEO's Amazon proposal.

What a statement and footprint that complex would establish. I wish SW and the Cleveland community the best. It would be awesome by all accounts. 

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52 minutes ago, Frmr CLEder said:

I wouldn't compare a global corporation like SW to Stark Enterprises.  SW has far too many resources to bring its projects to closure.

 

"Capital stack" isn't a phrase that's going to be used for the SHW HQ+R&D. And the city subsidies for this project are likely to be pretty routine. I'm just not getting the sense that those are going to tip the scale for SHW.

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